Taxable Municipal Bonds Are Here to Stay

John Murphy, Marshall Kitain and Michelle Estes

Municipal Finance Journal, 2021, vol. 42, issue 3, 89 - 101

Abstract: The municipal market’s landscape has changed and taxable municipal bonds are here to stay. For issuers, the option to issue taxable debt to fund capital improvements or to advance refund tax-exempt debt for present value savings has been a game changer. The elimination of advanced refundings in the 2017 tax act caused municipal issuers to pivot and find new financing methods and vehicles. The issuance of taxable municipal bonds is not new. The market had to change when the Build America Bond (BAB) program was introduced after the Great Recession of 2008. The BAB program introduced the value proposition of municipal bonds to the world, and although the program was short-lived, its impact on the market has remained.

Date: 2021
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